In a recent Total Telecom webinar in partnership with Syniverse, panellists discussed the opportunities and challenges of 5G roaming and why new technologies necessitate new strategies
The Internet of Things (IoT) is undergoing a major transformation. Not only is the market growing to an incredible extent, with some analysts even predicting a total value of $1.4 trillion by 2027, but its composition is also changing. For now, the vast majority of these devices are not really roaming, or even using mobile connections, but are instead reliant on other forms of connectivity, like Wi-Fi and Bluetooth.
However, this will not be the case for long. Low power wide-area networks (LPWAN) are growing rapidly to address the massive IoT market applications that are now being demanded, set to rise to 41% of module sales by 2025. As enterprises continue to focus on digitalisation in the wake of the coronavirus pandemic, the motivation for growth is clear to see.
On the other hand, telco IoT monetisation strategies are being slow to adapt to this evolving environment, still being overly reliant on traditional revenue streams.
“The business model that roaming has traditionally used is based on voice, SMS, etc. It’s really geared towards consumer services and so hasn’t really adapted to meet the scope and personalised nature of the IoT,” explained Steffen Sorrell, Chief of Research at Kaleido Intelligence and moderator of Total Telecom’s latest webinar ‘Monetizing IoT Globally: Mapping the Journey from IoT Roaming to Revenue Growth’.
Put simply, these traffic-based models will soon be unsustainable with the growth of massive IoT. Monetisation strategies must be reimagined if it is to effectively nurture and not strangle this market’s growth, encouraging permanent roaming and providing a balanced pricing model at both the retail and wholesale layers.
Roaming vs local access
At the core of this challenge is a fundamental connectivity dilemma: how do we connect these devices on the move?
For Johannes Opitz, VP Commercial Roaming & International Mobile Wholesale at Deutsche Telekom, the choice of method here should be based on the customer’s unique demands.
“The beauty of roaming is multi-network access, and it works – we’ve been using it for the last 20 years,” he explained. “There is not a lot of difference whether you provide connectivity via roaming or via local access. Yes, there are certain signalling costs associated from a roaming perspective, but it really comes down to the needs of the customer.”
“If the customer wants to have the best coverage in an area, then you have to go via roaming. If the customer wants low latency, then you could consider premium IPX (internetwork Packet Exchange) services. If the customer actually requires a local breakout, then you can consider going local, or still use roaming in combination.”
“On a commercial level, I don’t think there’s a huge disparity between roaming rates and local wholesale rates,” he concluded. “The decision will ultimately be driven by customer demand and the visited network demand as well.”
Futureproofing is here a key concern for customers, who want to ensure that expansion into new markets can be a seamless process.
“We see many customers who are clearly looking towards global manufacturing. They aren’t necessarily going everywhere around the world straight away, but they want to future-proof their business,” said Oliver Potter, Director of IoT at Truphone. “They might have three markets or five markets where they’re launching initially, but they want that same product to be able to go everywhere. So, it’s important that we as an industry work out how to serve that type of customer need.”
As a result, operators must become orchestrators, absorbing the complexity inherent within the challenge of cross-border connectivity, to ultimately providing a simple solution for enterprise customers. From the growth of satellite to 5G, the connectivity space is becoming more complicated, but it is the job of the operators to simplify these choices for their customers.
“Eventually it will be a blend of roaming and localised solutions,” said Douwe van der Heij, Senior Director, Global Product Management at Syniverse. “In fact, there will be a blend of multiple technologies, with roaming taking place on the back of 2G, 3G, 4G, and 5G… There are other connectivity solutions that may have to chip in to provide the quality of experience that the enterprises need.”
Tackling the pricing challenge
So, if customers ultimately care more about reliability of service than their specific type of connectivity they receive, how should this inform our strategic approach to pricing?
For the panellists, the necessity of striking a balance between retail and wholesale was imperative.
“We need to find a way for MNOs to monetise these devices, but at the same time creating not too much of a disparity to the retail elements,” explained Mattias Karlsson, Head of New Business & Strategic Partnerships, Telefonica. “I think that in the future, compared to today, multi-network access in one country will become more of a premium product than in the past due to these changes.”
But while roaming could become viewed as more of a premium service, the operators must be equally careful not to increase prices so much that they stifle growth.
“We should not repeat the mistakes we as mobile operators have made in the past, especially in the roaming business, when looking back 20 years ago roaming was very expensive so nobody was using it,” he explained.
If this were to happen, emerging revenue streams that could be nurtured into long-term, stable growth could instead be prematurely stamped out. Take connected vehicles, for example, which will of course need multi-network access connectivity of the highest quality. If the retail price is increased for the customer, this will potentially increase churn for an emerging market that is already exhibiting high churn.
“We need to find the right equilibrium between getting the return for the network investment, having a retail price point set effectively in order to stimulate growth, and then to find the right wholesale balance in between,” sad Opitz. “If these things do not go very well, we will not see the IoT grow to such a large extent.”
A collaborative future
As the complexity and scale of connectivity solutions increases, it is becoming increasingly clear that there is an enormous IoT opportunity for operators of all sizes and geographies. The key here will be industry collaboration, building on existing relationships and forging new ones to ensure that customers receive the best experience possible.
“Even our partners in the industry that are perhaps themselves not big in the IoT get a good understanding of the business opportunity that is not just there for global IoT providers,” said van der Heij. “They too can have a piece of the cake if they are collaborative.”
You can watch the webinar, Monetising IoT Globally: Mapping the journey from IoT roaming to revenue growth, in full for free here